Foreign direct investment continues to be the weak link in Pakistan’s economy. Regardless of the rise FDI has seen in February, foreign direct investment has continued to fall in 8MFY24.
Net FDI in February 2024 depicted a growth of 15.7 percent year-on-year o $130 million as per the latest data released by the State Bank of Pakistan. Inflows of FDI during the month were up by 16.25 percent year-on-year, while outflows were also up by 17.8 percent year-on-year.
Overall, net FDI in 8MFY24 fell by 17 percent year-on-year, where outflows for the period were almost half of the total FDI inflows in 8MFY24. During the period, Hong Kong took the lead with the highest FDI in the country, accounting for a 56 percent year-on-year growth and a share of almost 30 percent in total FDI for 8MFY24. China witnessed a significant decline of over 80 percent year-on-year in net FDI to Pakistan. Together China and Hong Kong make up the largest share of FDI in the country.
The contribution to FDI from a sector perspective remained unchanged and unraveled with the power sector leading the pack followed by oil and gas exploration and the financial business sector.
In all honesty, SIFC’s efforts so far alone cannot fix the economic challenge in the country. The Special Investment Facilitation Council has been actively inking agreements with various governments while opening doors of the country to global investors. However, under the SIFC umbrella, major changes and efforts will be required to attract the much-needed foreign investment. First and foremost, structural reforms must be undertaken to ease the cost of doing business in the country by reducing bureaucratic hurdles and introducing incentive schemes to attract investment, A related effort would bathe digitalization and automation to streamline processes and increase tax revenues while converting the non-regulated sector to regulated sectors.
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